Smart luxury is complex

09 Jan 2017

Recently I looked at Vertu phones in a luxury shop at the Frankfurt airport. They were sold for half the price. I know people who liked them years ago, but now I don’t know anyone who has talked about them, and definitely no one who has bought them recently. I also checked the latest Apple Watches - quite expensive, but not really a popular luxury yet. At the same time Montblanc, Omega and Philippe Patek were selling more expensive normal watches at the same airport. Why it is so difficult to create high tech luxury products?

Over 20 years ago in internal strategy papers and management courses Nokia compared the phone market to the watch market. They thought that when the market becomes more mature, it will become like the watch market - people could have several phones, one for work, one for sport and one for parties. Nokia also hired some people from the Swedish car industry, and they liked to talk 10 years ago about how the market is mature and it starting to be like a car market. This transformation never really occurred, because Apple and Google changed the rules before it happened.

Now Apple and even Samsung are starting to find themselves in the same situation - they also need to utilize the brand and make higher margin new products. Apple has been targeting the high end of the smartphone market, but it is not really in the luxury brand category. Both of them must now also find new ways to protect their market share and especially profits.

Vertu has fired people, some executives have left and the company is also looking for new investors. One could say a Vertu phone is like an Italian sport car, a status symbol and expensive, but not very practical. And someone could add that Italian cars are more beautiful anyway. It looks like its very hard to make luxury mobile phones. I have also seen several plans to create a luxury carrier (or MVNO) that offers personal services, special value and status symbols. But this hasn’t really happened.

Why is the watch market so different from the phone market and even from the smart watch market? Is it that smart devices are still such a new market that it hasn’t got the maturity of the watch or car markets? Or is it more linked to the technical development and disruptions in the market that the state-of-the-art technology inside devices is more important than a status brand? Or is it something more common for digital products that it is difficult to create status symbols there and people go after price, usability and usage value?

One factor is definitely the technology development, especially the digital and internet aspects that have fundamentally changed how the devices are used and the value they offer to the end users. There are sometimes some ideas to make more basic mobile phones and retro phones, but the reality is that a phone just for talking and text messages would be quite useless now for most users. Technology development would make a phone old in a couple of years. To see the time is a very clear and focused need and watches have become like jewels that are allowed for men too.

With digital and online services that value is really in the Internet, cloud and services, not in the device to use them. The device must just offer almost like an invisible access to the actual service. This is why Apple’s great value has been good user experience, why Amazon offers its tablets for very low price and Google tries to manage software in all devices. The access device is a tool, not intrinsic value.

It is still hard to say what will be the future developments in digital devices and services, and what could be the model to create luxury brands in those categories. One learning is that the luxury products are typically produced for a very specific need, not multi-function latest technology. People also look for different kind experiences with luxury products than daily tools. Luxury products like expensive watches, coffee machines, pens and cars are typically for special situations, not to compete with products for daily use. Maybe the first thing to do, if you want to a luxury product for the smart digital devices market, is to ignore the mainstream competition totally, not even try to compete with them, and instead find a very specific single need and make a totally different kind special product only for that.

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